The invention relates generally to merchant processing of purchase card transactions. In particular, the invention relates to systems and methods for processing a variety of purchase card products and transaction types that may be presented to a merchant.
Purchasing of goods and services using a purchase card (e.g., credit card or debit card) for payment has become commonplace. Card issuers, such as banks, retailers, or other financial service providers, provide cardholders with purchase card accounts. The card issuer agrees to transfer funds to various merchants—either directly or via an intermediary—in payment for goods and services received by the cardholder, and the cardholder agrees either to repay the card issuer or to have funds deducted from the cardholder's deposit account. The cardholder receives a presentation instrument, which is typically a rectangular piece of plastic bearing a card number and other identifying information. To purchase goods or services, the cardholder either presents the presentation instrument or provides the card number to a merchant. The merchant accepts the presentation instrument and delivers the goods or services to the customer, generating a transaction record (ticket) in paper or electronic form. In order for the merchant to be paid and the cardholder to be billed, the merchant typically submits the ticket to an acquiring bank for processing.
Acquirer processing (also called merchant processing) of purchase card transactions is complicated by a number of factors. For instance, how a purchase card transaction is processed depends on the particular card product used. For example, some card products (e.g., VISA and MASTERCARD products) are “interchange” cards, which are issued by various banks or other institutions under the authority of a card association that establishes rules regarding the use and acceptance of the card products. Each card association typically provides an interchange service for routing transactions between an acquiring bank and a card issuing bank. An interchange card generally may be accepted by any merchant, as long as the merchant maintains an account with an acquiring bank (or other institution) that participates in the card association. Authorization and settlement requests for interchange cards are generally processed by routing the requests from the acquiring bank to the card association, which then routes the requests to the card issuing bank. Other card products may be “private label” products, for which routing of requests between banks is not supported. For such cards, it is generally necessary the acquiring bank also be the card issuing bank, making the acceptance of such cards limited. Examples include credit cards issued by retailers, which are usually accepted only at the retailer's own outlets.
Transaction processing is further complicated by the variety of card products that a single card association or issuer may offer. For instance, a large card association (e.g., the VISA or MASTERCARD association) typically offers a range of card products such as credit cards (where the cardholder is billed for purchases), check cards (where purchase amounts are deducted directly from the cardholder's checking account), corporate cards (where an employer of the cardholder receives the bill), and so on. Each card product may be subject to different rules and regulations regarding the use, acceptance, and processing of the card product.
Still more complexity arises due to card issuers' participation in electronic debit networks such as the NYCE or PLUS networks. These debit networks typically do not issue card products themselves. Instead, they agree with various banks to provide network services for routing debit card transactions from an acquiring bank to a card issuing bank. An issuing bank may participate in multiple electronic debit networks; cards issued by the bank generally bear a badge for each debit network in which the bank participates. Thus, depending on where and how it is presented, the same plastic could be used, e.g., for a credit card transaction to be routed through the VISA interchange or a debit card transaction to be routed through the NYCE network or the PLUS network. An acquiring bank must be able to distinguish these uses and properly route each transaction.
Yet another layer of complexity is added by the possibility that the cardholder may present the same card to a merchant for different types of transactions. For instance, in addition to sales transactions, the cardholder may desire to return goods previously purchased using the card, obtain a cash advance using the card, or make a payment on the outstanding balance of the card account. Each card association or issuer has rules related to whether a merchant may accept a particular card product for each type of transaction. For instance, a retail outlet may be authorized to accept an interchange card for sales but not for cash advances; the same retail outlet may be authorized to accept both sales and cash transactions using a debit network.
To accommodate customer preferences, many merchants desire to offer a variety of options to their customers, including the ability to use a number of different card products from different issuers, associations, and networks, as well as the ability to perform different types of transactions for a particular card product. At the same time, merchants also desire to control expenses associated with accepting different card products, for instance, by not having to maintain accounts with a number of different acquiring banks. Thus, in order to provide effective card processing services to a merchant, an acquiring bank must be prepared to process a variety of card products and transaction types, routing each transaction to the correct destination, deducting appropriate fees, and keeping accurate records of activity.
To assist acquiring banks, third-party merchant services providers offer transaction processing services to a number of such banks. In addition to managing the processing and recording of card transactions, such a third-party provider must also manage information regarding which card products and transaction types a particular one of its acquiring bank clients is allowed to accept, in addition to information about each merchant.
An acquiring bank or a third-party service provider generally operates one or more platforms for processing purchase card transactions. Each platform includes various data stores, such as merchant records that provide information about each merchant account; the record for a particular merchant may be identified by a unique merchant identification number. The platform receives a batch of transaction tickets from the merchant, transfers corresponding funds to the merchant's account, routes tickets to the appropriate entities for settlement, and keeps records of the merchant's activity for accounting and reporting purposes.
Existing systems are limited in their ability to process a merchant's transactions involving a variety of card products and transaction types. For example, in some existing systems, a private label card is implemented using a processing platform that has both the cardholder account records and the merchant account records, thereby eliminating the need to route the transactions to another system for settlement. However, such platforms may be unable to handle processing of interchange card transactions, for which different formatting and routing procedures are required. Thus, a separate platform is usually provided for interchange cards. Consequently, a merchant who accepts both a private label card and an interchange card must have a record on two different platforms, generally with a different identification number on each platform. Either the merchant must submit transactions separately (i.e., in separate batches) for the two card products or the transactions must be rebatched prior to processing. In either case, there is generally no link between the merchant records on the two processing platforms: the merchant receives reports separately for each card, and any changes to the merchant data (e.g., the merchant's address) must be made separately on each system. Similar problems may arise in regard to other combinations of card products having conflicting processing rules. In some instances, the overhead associated with handling additional card products causes acquiring banks or third-party providers to limit the merchant's options for accepting various cards.
Existing systems also limit the ability of a merchant to accept different transaction types. For instance, many existing systems limit a merchant record to one or two transaction types per card product (e.g., sales and returns only, or cash advances and payments only). Thus, if a merchant desires to accept both sales and cash advance transactions for a particular card product, two records would have to be maintained for the merchant. Either the merchant is required to submit separate batches for each transaction type or the transactions are rebatched prior to processing. Again, this leads to inefficiency and overhead that may cause acquiring banks or third party providers to limit the merchant's options for allowing customers to perform different transactions.
Further, existing systems also limit the acquiring bank's ability to assess fees that reflect the bank's actual costs. For example, when an acquiring bank acquires a ticket, it generally pays to the merchant account an amount less than the face value of the ticket by a percentage known as the discount rate. The discount rate reflects the risk that the acquiring bank will not be repaid by the card issuer; in the case of interchange cards, it also reflects the interchange fee (set by the card association) that the acquiring bank will have to pay in settlement of the transaction. The risk and the interchange fee may vary depending on the card product used. For instance, a card association may set an interchange fee of 2% of the transaction total for transactions using its credit card products and 3% of the transaction total for transactions using its debit card products. Such fees may vary from one association, issuer, or network to another. However, existing systems typically do not enable the acquiring bank to determine the discount rate on a transaction-by-transaction basis. In some systems, the merchant record is associated with one discount rate so that applying different discount rates for different transactions would again require maintaining multiple records for the same merchant. Further, existing systems for processing ticket acquisition often do not support determining the particular card product that was used.
Hence, it would be desirable to manage merchant accounts in a manner that provides increased flexibility for acquiring banks to process different card products and different transaction types, and to price transactions according to the card product used.